The vexed matter of whether someone is really self employed has been the subject of an Appeal judgment again, and underlines that many of those used in business as self employed contractors are not that at all. The importance, apart from tax, is that they accrue paid annual holiday and are entitled to the minimum wage. These sums can accrue over time and add up to a big hit for an unsuspecting employer.

In this case, a courier agreed to cover three hour shifts. Once he was signed on for a shift, he had to be available for three hours. The contract said that he could substitute someone else to do it, but he could only get out of doing it if he had someone else that would cover it. 

This is often known as a “Substitution clause” and is relevant because it is one of the tests for a self employed person. Can they send someone else?  The thinking behind this is based on the fact that to be self employed, a person needs to be in business on their own account.

The Appeal tribunal ruled that this was not a self employed contract, as the courier had restrictions on whether he could decline a shift. This was not a man in business on his own account.

The message from this case is that an employer, or head contractor, should ask whether the self employed person really is in business on their own account. Do they have web site? For example, do they supply or work for others who are not linked to the employer? If not, then the courts will look through any ruse and label the arrangement for what it is, even if that means an employer may face paying things such as back pay for the last two years, to perhaps 20 people. For holiday pay, if one person should have got 28 days holiday a year, for two years that’s 56 days’ pay. If you have 20 staff covered by this, it would be 1120 days’ pay to find across the workforce!

The courts continue to call employers out on this, so it’s worth making sure your arrangements are sound and not reliant on the good will of the contractors you use. It seems that can melt quite quickly. The full judgment can be found below: